Calmena Energy Services Inc.

Calmena Energy Services Inc.

March 29, 2011 22:00 ET

Calmena Energy Services Inc. Announces Q4 and Year End 2010 Results

CALGARY, ALBERTA--(Marketwire - March 29, 2011) - Calmena Energy Services Inc. ("Calmena" or the "Company") (TSX:CEZ) is pleased to report its financial results for the year ended December 31, 2010. All figures are reported in Canadian dollars unless otherwise stated. Our audited consolidated financial statements with notes and related MD&A for the period will be filed separately on SEDAR ( Please review that material in conjunction with this press release.


In 2010, we continued to execute on our strategy of establishing operations in select geographic markets as well as enhancing the new service lines we initiated in late 2009. Through a combination of strategic acquisitions and operational expansion, we completed the strategic objectives we set out at the beginning of the year for our well construction service line offerings as well as geographic diversification underpinned by operations in five countries. During 2010 we completed three acquisitions; successfully assumed operational control of contract drilling operations in Mexico; generated long term contracts and set up operational bases in Colombia and Brazil; and managed a significant resurgence of activity in our Canadian operations, focusing on new and existing service lines to capitalize on oilfield services industry strategic trends. It has been a busy year, and not without its challenges. This was evident in Mexico where Pemex initiated a review of its operations, resulting in a loss of work for our client, and the resulting termination of our long term drilling contract for six rigs in the middle of 2010. These challenges affected our financial results for the year but they also served to highlight the need for additional geographic diversification and acted as catalysts to accelerate our expansion into other key Latin American markets as well as bolster our North American operations. 

More specifically, during 2010 we:

  • Successfully assumed operational control of contract drilling operations for six modern rigs, all featuring some combination of automated pad walking systems, top-drives and automated pipe handling capabilities out of two bases in Mexico;

  • Added a directional drilling service line at the beginning of the year with the completion of an acquisition with operations in the United States ("US") and Mexico;

  • Added engineering and product development support to the directional services business in the second quarter with the acquisition of a Canadian based developer and manufacturer of measurement while drilling technology;

  • Entered the Middle East and North African marketplace in the second quarter with the acquisition of two drilling rigs and the establishment of a regional office in Dubai;

  • Balanced our capital structure in the second quarter with the establishment of credit facilities with total capacity of up to $45.0 million with a new lender;

  • Expanded into Colombia by redeploying an existing Mexico based drilling rig in the fourth quarter on the award of a services contract with a major Canadian resource company; and

  • Expanded to Brazil in the fourth quarter on the acquisition of a four year contract to provide a heli-portable drilling rig to the Brazilian national oil company, Petrobras. Construction of the rig was completed in the first quarter of 2011, and operations are expected to commence before the end of the second quarter of 2011.

To date in 2011, we have:

  • Entered into service contracts for two more of our drilling rigs in Mexico which commenced operations in February and March;

  • Signed a letter of intent to provide one of our Mexico based drilling rigs to an operator in Colombia. Operations are expected to start in the second quarter of 2011; and

  • Been the successful bidder for three year services contracts for four of our Canadian based single drilling rigs with Petrobras. We are currently proceeding through Petrobras' tender protocol related to these rigs and anticipate formal contract award early in the second quarter.


The table below provides a summary of Calmena's financial and operating results for the quarter and year ended December 31, 2010 and 2009.

Summary Financial Information
($ thousands, except per share amounts) Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
Revenue from continuing operations $ 21,667 $ 11,494 $ 93,005 $ 34,955
EBITDA1 $ 504 $ 1,650 $ 9,268 $ 3,411
Net loss from continuing operations $ (5,591) $ (1,852) $ (16,854) $ (6,195)
  Per common share - basic and diluted $ (0.02) $ (0.01) $ (0.07) $ (0.05)
Net loss for the period $ (6,112) $ (2,223) $ (17,758) $ (8,909)
Per common share - basic and diluted $ (0.03) $ (0.02) $ (0.07) $ (0.07)

1 See definition in Non-GAAP Measures section.
($ thousands) As at December 31, As at December 31,
  2010 2009
Total assets $ 193,240 $ 140,068
Debt and capital lease obligations net of cash $ 47,883 $ 5,223
Shareholders' equity $ 118,820 $ 122,335

Total Year

Revenue was $93.0 million for the year ended December 31, 2010, compared to $35.0 million for the year ended December 31, 2009. The increase reflects: increased activity in Canada resulting from the Company's ability to capitalize in most services lines on the industry trend toward drilling more horizontal wells and the associated growth of horizontal multi-stage fracing in Canada; the acquisitions of the directional drilling services business in the United States and a two rig drilling operation in Libya; and the first full year of operations in Mexico. These were muted by start-up related challenges in Libya in September and October; the cancellation of our long term drilling services contract and overall slowdown in Mexican drilling activity in the second half of the year. 

EBITDA of $9.3 million for the year ended December 31, 2010 was an increase of $5.9 million compared to the year ended December 31, 2009. While North American operations posted strong year over year growth and profitability, overall financial performance was impacted by a combination of start-up costs and challenges in new markets. Although the commencement of drilling operations in Mexico contributed positively to the full year's financial performance with a positive impact during the first half of the year, the termination of the drilling services contract late in the second quarter weighed on financial performance. In addition, the development of bases in Colombia and Brazil, which are now generating business in 2011, contributed to increased costs relative to 2009. 

Fourth Quarter

Revenue was $21.7 million for the fourth quarter of 2010, compared to $11.5 million for the same period in 2009. The increase resulted from: growth in Canadian operations; the addition of directional drilling services in the US, contribution from Libyan drilling operations; and a small impact from Colombian operations, which commenced in December. Mexican revenue decreased materially in the fourth quarter of 2010 for the reasons noted above. In the fourth quarter of 2009, Mexican operations generated revenue and positive EBITDA from the leasing of the six drilling rigs, which were acquired in October of that year.

EBITDA was $504,000 for the fourth quarter of 2010 compared to $1.7 million for the same period in 2009. The fourth quarter of 2010 saw improved results from Canada, the addition of positive EBITDA from US operations as well as a small positive contribution from Libya. Libya's overall impact was muted by virtually no revenue in October as operations were shutdown for upgrades to our rigs. In Mexico we experienced negative EBITDA as a result of re-activation costs and ongoing administration and operational costs required to facilitate the resumption of drilling services on short term notice for rigs anticipated to commence operations late in the fourth quarter of 2010, severance and write-down costs associated with downsizing our directional services business and redeploying systems to Colombia.


Calmena remains focused on executing its strategic plan of creating a leading energy services provider. We have successfully re-positioned our Canadian business to capitalize on the new resource play trend which is driving our customers' operations. The rewards of this decision have been evident in recent quarters as the MicroSeismic Services and Horizontal Completion activities, which define our Wireline Technologies group, have demonstrated strong industry acceptance and financial growth. We are confident these businesses have sustainable growth opportunities both in North America as well as in evolving international markets where the outlook for resource based activity remains promising. These initiatives will underpin Calmena's longer term strategic differentiation and, combined with a select strategic geographic focus, will result in sustainable growth.

Our directional services business has delivered solid results in the US and is well positioned with both new technology and new geographical platforms to continue to generate organic growth. Operations in the US have enjoyed improved pricing, strengthened utilization and, more recently, increased differentiation through the introduction of internally developed technologies. Calmena's internally developed directional services technology, after establishing commercial acceptance in late 2010, is becoming a meaningful part of our directional services business. We anticipate these developments will continue to fuel growth in 2011 and ultimately positively position the Company amongst a select group of competitors.

We were disappointed with market dynamics in Mexico in 2010. Promising developments in 2011 have buoyed our views, with our rigs going back to work and we are seeing positive indications that utilization rates and pricing are improving. With one rig moved to Colombia and another enroute there, four of our original six rigs remain in Mexico. Two of these four rigs are operating and we are cautiously optimistic that full utilization will be achieved in the coming months. We believe Mexico is a market that holds promise for us, however if full utilization proves to be unachievable we are now in the position to be able to reallocate underperforming assets into the new markets we have established in Latin America. 

Colombia initiated operations in December with its first rig, and is being paid a stand-by rate while awaiting our customer to initiate drilling operations, which we anticipate will start in the second quarter. More recently, the Company has entered into a letter of intent to provide a second identical rig to another customer in the second quarter of 2011. We have also deployed directional drilling assets to Colombia, and are encouraged by the opportunity in what is one of the busiest service markets in Latin America. With full operational rates expected in the second quarter for both drilling rigs, we are encouraged by the prospect of our Colombian business providing a material positive contribution to Calmena's overall financial performance through the remainder of 2011. 

Brazil, which we believe is poised to be a significant new onshore drilling market in Latin America, is off to an encouraging start for Calmena. Calmena is well positioned to create a strong platform in Brazil in 2011, which will facilitate further growth in the years to come. Start-up costs will burden financial results in the first half of 2011 but by the fourth quarter we anticipate our Brazilian business to be a material contributor to our overall business. This is an exciting development for Calmena as we believe Brazil will prove to be a key strategic market for onshore service providers in the future. Along with operations in Mexico and Colombia, our Brazilian business rounds out a cohesive strategy for Latin America.

In February of 2011, Calmena announced that its operations in Libya had been temporarily suspended by its customer, Waha Oil Company ("Waha"). Waha is owned by Libya's national oil company in a joint venture with ConocoPhillips, Marathon Oil Company and Amerada Hess. As a precaution, we evacuated our foreign employees from Libya, racked and secured our rigs and continue to receive frequent updates confirming the safety of our rigs. We continue to closely monitor the situation in Libya and will provide further updates as new information becomes available.

In conclusion, Calmena is executing in North America and has delivered solid results. Execution of new contracts and a modest improvement in activity levels in some of our international markets, combined with continued success in North America, will result in a tangible demonstration of the viability of Calmena's geographic and service-line strategy. We remain steadfast in our belief that ultimately, diversification will prove to be the recipe for sustainable success for Calmena. 


Calmena is a diversified energy services company that provides well construction services to its customers operating in Canada, the United States, Latin America and the Middle East and North Africa. The common shares of Calmena trade on the Toronto Stock Exchange under the symbol "CEZ".


This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. Such statements represent Calmena's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures, anticipated future debt, revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Calmena believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Calmena's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Calmena.

More particularly, and without limitation, this news release contains forward-looking statements and information with respect to: timing of commencement of operations of heli portable rig in Brazil; timing of commencement of operations of Calmena's Mexican based drilling rigs which will be provided to an operator in Colombia; expected benefits to be received from the MicroSeismic Services and Horizontal Completion activities; expected benefits and growth opportunities from Calmena's directional services business; projected effect of increased activity in the United States on the Company's directional services, including the expected position of the Company in relation to its competitors; the Company's strategy for the remainder of 2011 with respect to its directional services technology; anticipated growth opportunities in Colombia and effect on financial performance; timing of utilization of Calmena's rigs in Mexico and Colombia; effect of full utilization of the Company's rigs in Mexico on financial performance; expected results of operations in Brazil on the Company's overall business; effect of recent developments in Libya on the Company's future operations; the outlook for Calmena's operations; expected growth in service lines; statements with respect to benefits from the continued implementation of the Company's strategy of international growth and product line diversification; effect of future diversification on Calmena's operations ; andthe Company's strategy for the remainder of 2010, including the focus of capital expenditures; and the statements under the heading "Outlook" in this press release.

These forward-looking statements and information are based on certain key expectations and assumptions made by the Company regarding: the implementation of the Company's international growth strategy; current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; ability of Calmena to re-finance or extend the maturity date of its senior debt; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to oilfield equipment rentals and production and ancillary services; effects of regulation by governmental agencies; and future operating costs. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements and information address future events, by their nature, such statements and information involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including, but not limited to, the impact of general economic conditions; industry conditions; volatility of commodity prices; decreased demand for energy services; competition from other energy services providers; the lack of availability of qualified personnel or management; ability of Calmena to re-finance or extend the maturity date of its senior debt and generate positive cash flow; failure of counterparties to perform on contracts; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; international operations; seasonality; loss of key customers; fluctuations in foreign exchange or interest rates and stock market volatility; international operations, including, but not limited to, effect of civil unrest on the Company's operations in Libya; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to, oilfield equipment rentals and production and ancillary services; liabilities and risks, including environmental liabilities and risks inherent in oil and natural gas operations; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; failure to successfully negotiate contracts for drilling rig operations; and the ability to access sufficient capital from internal and external sources.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of the Company are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website ( 

The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.


The following measures are used within this release, but not recognized under GAAP. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net loss and net loss per share as calculated in accordance with GAAP:

EBITDA (Earnings before interest, income taxes, depreciation and amortization, foreign exchange and share based compensation) – Management believes that EBITDA as derived from information reported in the Consolidated Statement of Operations and Deficit is a useful supplemental measure as it provides an indication of the Company's ability to generate funds by the Company's core business activities prior to consideration of how those activities are financed, the impact of foreign exchange, how the results are taxed, how funds are invested or how non-cash depreciation and amortization charges affect results.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Calmena Energy Services Inc.
    John King
    President and Chief Executive Officer
    (403) 225-3879
    (403) 366-2066 (FAX)
    Calmena Energy Services Inc.
    Peter Balkwill
    Vice President, Finance & CFO
    (403) 225-3879
    (403) 366-2066 (FAX)
    Calmena Energy Services Inc.
    700, 333 - 7th Avenue SW
    Calgary, Alberta T2P 2Z1